Central banks expect gold to issue reserves and the dollar to decline

The vast majority of central banks around the world now see gold as one of the more prominent reserve assets on the scene, indicating that the trend of de-dollarization will continue in the coming years. According to a survey by the World Gold Council, 62% of banks expect gold to represent a larger share of total reserves over the next five years, compared to last year’s reading of 46%. The poll found that “half of the respondents expect the dollar to represent 40-50% of reserves in five years.” This may represent a decrease from the third quarter, when the dollar accounted for 51% of reserves and gold accounted for 15% of them. And a note from the World Gold Council came out saying: “Therefore, the logical reason for increasing gold holdings is not surprising because interest rate levels, inflation fears, and geopolitical risks are still the main factors in central bank reserve management decisions as they were in the past year.” Central banks continued to buy gold aggressively, especially after the Russian-Ukrainian crisis last year led to sanctions against Moscow that froze its foreign exchange holdings. Accordingly, many countries tried to reduce their exposure to the dollar in their economies, and gold appeared as a major alternative. This trend continued this year as the first quarter saw central bank purchases of gold increase by 176% over last year. However, there is a division in the expectations of central banks in developed economies and in developing countries, while emerging countries were more optimistic about the future role of gold. For example, these banks led expectations of a decline in dollar reserves, while many developed economies expected dollar levels to remain unchanged. The World Gold Council said that “central banks in emerging markets and developing economies in particular have expressed persistent concerns about the impact of geopolitical challenges on their decisions related to reserve management; With many of them appreciating gold as a way to manage these risks.